Chancellor’s Budget – Wine duty up again!

Yesterday’s budget by Chancellor George Osbourne did nothing for wine drinkers as he kept the existing alcohol duty escalator as put in place by the previous Labour government. This means the excise duty on a typical bottle of wine will rise by 10 pence plus VAT. On sparkling wines and wines over 15% ABV the increase will be 13 pence plus VAT.

This takes excise duty to £2 per bottle for standard wine, plus VAT of course which comes to £2.40.

A typical bottle of spirits (40% abv, 70cl bottle) will increase by 40 pence plus VAT. And cider and alcopops will also increase.

The only relief was on beer as the government finally caved in to pressure from an assortment of campaigns within the British pub industry, and beer duty was actually reduced by 1p per pint. This is because beer is the UK’s traditional drink and is seen as a chore manufacturing enterprise creating jobs.

Wine on the other hand is virtually all imported, and with one eye on our balance of payments, is seen as fair game. Not great news for the UK wine industry which is experiencing torrid times. The average price of a bottle of wine sold in the UK last year was £5.04 – bearing in mind £2.74 was pure tax! There’s no margin to absorb this 12 pence increase so we will see cheap wine move to the next price point. No doubt we will soon see bottle sizes reduce as the supermarkets start offering their own label plonk in 50cl bottles or even cans or cardboard/plastic boxes to keep under sensitive price points.

If we factor in the ever weakening pound, and the global reduction in production in 2012 due to bad weather virtually worldwide, we’ll see some major price increases this year. The UK wine trade is forecast to shrink by as much as 10% in the next two years, and that is going to take some heavy casualties presumably from the struggling independent retail sector.

As I mentioned in a post on the budget last year, every time the government has increased duty on alcohol it has actually taken LESS in revenue as sales fall. Is it a ploy to make us drink less then? Sadly I don’t think they’re that clever and it’s just a poorly thought out tax increase. The UK now pays over 60% of all alcohol duties in the EU although we only consume about 10% of the alcohol.

And the duty escalator is still in place for next year when another 11p will go on a bottle of wine, meaning a 30p increase in 3 years. Day trip to France anybody?